Production capacity is 2,000,000 units. Direct materials are $.10, Direct labor is $.25, Variable overhead is $.15, and Fixed overhead is $.40 making the total cost per unit $.90. At 2,000,000 units produced and sold, what are the total fixed costs? Fixed cost per unit? At the selling price of $1.75, how much is gross margin?

If fixed costs are the same, but only 1,600,000 units are produced and sold does the fixed cost per unit increase or decrease? And what is the fixed cost per unit? What is the total cost per unit? If the sales price per unit remains at $1.75, how much gross margin will be earned?